Correlation Between SERI INDUSTRIAL and SWISS WATER

Can any of the company-specific risk be diversified away by investing in both SERI INDUSTRIAL and SWISS WATER at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SERI INDUSTRIAL and SWISS WATER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SERI INDUSTRIAL EO and SWISS WATER DECAFFCOFFEE, you can compare the effects of market volatilities on SERI INDUSTRIAL and SWISS WATER and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SERI INDUSTRIAL with a short position of SWISS WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of SERI INDUSTRIAL and SWISS WATER.

Diversification Opportunities for SERI INDUSTRIAL and SWISS WATER

0.61

Correlation Coefficient

SERI INDUSTRIAL  SWISS WATER

Poor diversification

The 3 months correlation between SERI and SWISS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SERI INDUSTRIAL EO and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE and SERI INDUSTRIAL is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SERI INDUSTRIAL EO are associated (or correlated) with SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of SERI INDUSTRIAL i.e., SERI INDUSTRIAL and SWISS WATER go up and down completely randomly.

Pair Corralation between SERI INDUSTRIAL and SWISS WATER

Assuming the 90 days trading horizon SERI INDUSTRIAL EO is expected to generate 1.43 times more return on investment than SWISS WATER. However, SERI INDUSTRIAL is 1.43 times more volatile than SWISS WATER DECAFFCOFFEE. It trades about -0.01 of its potential returns per unit of risk. SWISS WATER DECAFFCOFFEE is currently generating about -0.07 per unit of risk. If you would invest  273.00  in SERI INDUSTRIAL EO on October 24, 2024 and sell it today you would lose (23.00) from holding SERI INDUSTRIAL EO or give up 8.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

SERI INDUSTRIAL EO  vs.  SWISS WATER DECAFFCOFFEE

SERI INDUSTRIAL EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SERI INDUSTRIAL EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, SERI INDUSTRIAL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SWISS WATER DECAFFCOFFEE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SERI INDUSTRIAL and SWISS WATER

The main advantage of trading using opposite SERI INDUSTRIAL and SWISS WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SERI INDUSTRIAL position performs unexpectedly, SWISS WATER can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SWISS WATER will offset losses from the drop in SWISS WATER's long position.

The idea behind SERI INDUSTRIAL EO and SWISS WATER DECAFFCOFFEE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.